Category Archives: Economic Analysis

This is the Best of All Possible Words

Posted on May 9, 2012 by Michael Harris

Gottfried Wilhelm Leibniz (July 1, 1646 – November 14, 1716) believed that this is the best of all possible worlds. In his 1710 essay Théodicée he argued that the actual world is the best of all possible worlds. Although Leibniz was criticized by pessimists … Continue reading →

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Never start a fight with the FED because you will lose

Posted on April 20, 2012 by Michael Harris

The lesson is never start a fight with the FED. When it comes to bonds, the FED is the boss, not some bond fund managers who are just the humble servants of the FED although they often commit the original financial sin of trying to overthrow the … Continue reading →

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Bonds Defy Classical Technical Analysis Once More

Posted on April 10, 2012 by Michael Harris

A few weeks ago we heard and read quite a few exaggerations about the future direction of bond yields, mainly by the same people who have made the same gross mistake a year ago. The financial media called a 40 basis point correction … Continue reading →

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Probability of Rising Commodity Prices Causing a Stock Market Crash is Very Low

Posted on February 27, 2012 by Michael Harris

Some analysts have argued that the recent rise in commodity prices and especially the rally in crude oil prices may cause a stock market crash. However, the current situation does not compare to the conditions present in 2007 and 2008.

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Baltic Dry Index Collapse: What Does it Mean if Anything at All?

Posted on February 7, 2012 by Michael Harris

The Baltic Dry Index (BDI) has declined about 63% since the beginning of this year. This spells trouble for over-leveraged shipping companies, especially for those expecting new build deliveries but it says little about the prospects of worldwide economic growth. As a … Continue reading →

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The Real Value of Facebook, Sans Envy

Posted on February 5, 2012 by Michael Harris

I do not plan to invest in the stock at this point but I will try to explain here the real value of this company for the economy, not the value speculators or investors are looking for.

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Bond Yields Are Dropping in the Face of Increasing Global Uncertainty

Posted on January 27, 2012 by Michael Harris

Bond Yields dropped after the FED announcement of their interest rate policy. The 10-Year Note yield fell below 2% after breaking above the upper tendline  of the down-channel it has formed since last November. It appears that inflation expectations play a secondary role … Continue reading →

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Spot Gold Technical Picture is Problematic

Posted on January 17, 2012 by Michael Harris

Since my last post on gold two weeks ago, this precious metal has gained about $40 an ounce but prices are still struggling to stay above the 200-day simple moving average and are getting near strong resistance from the down-trendline. To make … Continue reading →

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Sustained Negative Correlation Bewteen Stock and Bond Returns is Problematic

Posted on January 12, 2012 by Michael Harris

Over the longer-term stock and bond returns show a small but positive correlation. Periods of sustained low negative correlation usually indicate increasing stock market uncertainty and risk. The 120-day rolling correlation between SPY and TLT has been on a downtrend since February of last … Continue reading →

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Stocks and the Euro: Correlation or Randomness?

Posted on January 8, 2012 by Michael Harris

Is the euro correlated to stocks and how high is this correlation we keep hearing about in major news reports and technical analyst interviews? In this post I will show that the purported correlation is just another mirage emanating from the … Continue reading →

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